Wesfarmers announced the sale of its Australian and New Zealand underwriting operations to Insurance Australia Group (IAG) on 16 December 2013 for $1,845 million.
Wesfarmers’ insurance division consists of Lumley, WFI brands and Coles insurance.
Providing the sale clears competition commission hurdles (which includes the Australian Competition and Consumer Commission (ACCC) and New Zealand Commerce Commission), the Wesfarmers brands will further swell IAG’s portfolio which includes CGU, NRMA Insurance, SGIO, NZI, State and AMI. It is thought that the consolidation of the general insurance industry and the extent to which QBE, IAG and Suncorp dominate is likely to make the ACCC the most significant threat.
The sale, which is expected to take several months, includes the underwriting operations for Coles Insurance which will continue with Coles supermarkets under an agreement with a remaining 10 year term.
The fortified portfolio will make IAG the market leader across Australasia, pushing past QBE. The acquisition also gives IAG a
more balanced geographical presence across the states and regions, particularly in WA.
It is estimated that IAG’s total insurance market share in the country will rise to 27 percent, surpassing Suncorp’s 22 percent.